With a first ADS (Architectural Design Session) at the Microsoft Innovation Center in Denmark we stepped into a very interesting space. In October we spent three days together with a hoster and a software vendor discussing opportunities and technologies arround Software as a Service.
I think we need to figure out what are the interesting categories arround that theme.
For me there are three:

  1. Business impact
  2. Architecture of a SaaS solution
  3. Service Delivery platform

There are lot's of interesting discussions going on in regard to SaaS and its business impact and how it will change the IT world. I hope that my observation adds to this discussion event though it is an assumption and is not verified with hard figures. Here it is:

Hosters and ISV (especially Line Of Business ISVs) potentially approach SaaS from different perspectives.


The classic hoster:

1.       seems to be keen on moving up the stack to become an aggregator and gain more quality type of service offerings through SaaS.

The LOB ISV might have the following goals:

1.       Renting services from hosters (e.g. Operations but also things like Provisioning, Federation etc.)  to actually outsource the application but keep the business relationship with the customer

2.       Sell through the hoster their solution and create a new sales channel and the hoster has the customer/business relationship


IMHO the majority of classic hosters do not refer to themselves as service companies. So in many cases I would suspect that ISV option 1 does not fit to the business model of a hoster. This is rather a services play for service companies. 

I put together this slide to visualize this a little bit. The two curves are guesses – assuming that the economy of scale is higher in Small to medium sized services whereas the closer you get to LOB the scale goes down and therefore the margin decreases as well.